700,000 homeowners no longer underwater on mortgages

When mortgage borrowers have equity in their homes, they're less likely to fall into foreclosure since they have the home's value to tap if they run into a rough financial patch.

NEW YORK (CNNMoney) -- Thanks to improving home prices, fewer mortgage borrowers owe more on their homes than they are worth.

More than 700,000 homeowners were no longer underwater on their homes during the first quarter, according to CoreLogic.

According to the report, 11.4 million -- or 23.7% -- of mortgage borrowers were underwater on their homes at the end of March. That's down from the 12.1 million, or 25.2%, of borrowers who were underwater three months earlier.

"This is a meaningful improvement that is driven by quickly improving outlooks in some of the hardest hit markets," said Mark Fleming, CoreLogic's chief economist.

Home price rebounds, a better balance of supply and demand and fewer distressed sales all helped to reduce the number of people who were underwater during the quarter, he said.

Another 1.9 million homeowners were only 5% underwater on their homes during the quarter, suggesting that if home prices continue to climb, they too can soon breathe a sigh of relief.

When mortgage borrowers have equity in their homes, they're less likely to fall into foreclosure since they have the home's value to tap if they run into a rough financial patch.

"While the overall stagnating economic recovery will likely slow [the] housing market recovery in the second half of this year, reducing the number of underwater households is an important step toward reducing future mortgage default risk," said Fleming.

Home prices had fallen steadily since the housing crisis began and are still down about 34% since they peaked in mid-2006, according to the S&P/Case-Shiller home price index.

Now, however, some of the markets that recorded the steepest price drops have been enjoying a rebound. Phoenix, for example, has seen prices climb by 8.6% over the 12 months ended April 30, according to Case-Shiller. That was enough to move many homeowners back into positive territory.